IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 98-50952
_____________________
WASTE CONTROL SPECIALISTS, LLC,
Plaintiff-Appellant,
versus
ENVIROCARE OF TEXAS, INC.; ET AL.,
Defendants,
ENVIROCARE OF TEXAS, INC;
ENVIROCARE OF UTAH, INC.;
KHOSROW B. SEMNANI;
CHARLES A. JUDD; FRANK C. THORLEY,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court for the
Western District of Texas, Midland
_________________________________________________________________
January 18, 2000
Before REYNALDO G. GARZA, JOLLY, and WIENER, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
The issues presented in this appeal are, first, whether the
district court erred in failing to remand this antitrust and
business tort case to the state court by concluding that the
complaint fell within the artful pleading doctrine and, second,
whether the plaintiff waived its right to challenge federal
jurisdiction because, after its efforts to remand had failed, it
amended its complaint to state a federal claim.
I
The dispute between the appellant, Waste Control Specialists,
L.L.C. (“WCS”), and the appellees, Envirocare of Texas, Inc., et
al. (collectively, “Envirocare”), revolves around WCS’s bid to
enter the market for disposal of low-level radioactive and mixed
waste.
WCS brought this suit against Envirocare in Texas state court
alleging that “Envirocare conceived and implemented a plan to
destroy WCS’ ability to compete in the low-level radioactive and
mixed waste business.” WCS pled exclusively state law causes of
action. They ranged from allegations of violation of the Texas
Free Enterprise and Antitrust Act of 1993, Tex. Bus. & Com. Code
§ 15.05(b) (1987) (“Texas Antitrust Act”), to business tort claims.
Specifically, WCS alleged that Envirocare used its monopoly
position improperly to prevent WCS from obtaining the approval of
the state of Texas for its project. The alleged impropriety
turned, first, on allegations of false and defamatory
communications to state regulatory officials regarding the WCS
project. Second, WCS charged that Envirocare engaged in a sham
effort to create a competing facility in Andrews County, Texas.
WCS alleged that the sole purpose of this effort in Andrews County
was to incite a backlash against WCS based on citizen fear of that
county becoming a toxic dumping ground. Naturally, Envirocare
denied those allegations. Additionally, Envirocare raised the
Noerr-Pennington affirmative defense, i.e., that these activities
2
were immune from suit because efforts to influence public officials
cannot violate antitrust laws.
Ten months after filing its original state petition, WCS filed
an amended petition, apparently restricting its allegations to the
non-commercial waste market--a market with only one consumer of
disposal services, i.e., the only generator of non-commercial
waste, the United States Department of Energy. At that point,
Envirocare removed the action to federal district court. It
asserted that, because the only customer for non-commercial waste
market is the federal government, the single viable claim
propounded by WCS must be based on federal antitrust law,
notwithstanding that WCS’s complaint made no reference to any
federal law.
The district court agreed and, asserting the artful pleading
doctrine, denied WCS’s motion to remand. In filing its motion to
remand, WCS objected strenuously to what it considered Envirocare’s
improper removal. It also filed a motion to reconsider the order
denying remand. After its unsuccessful efforts to have the case
remanded, WCS faced Envirocare’s motion to dismiss. The district
court strongly suggested that WCS’s only potentially viable claim
was a federal one. Accordingly, WCS amended its complaint
expressly to allege a violation of the Sherman Act. Despite this
amendment, on Envirocare’s Fed. R. Civ. P. 12(b)(6) motion, the
district court dismissed WCS’s complaint, reasoning that
3
Envirocare’s activities were protected under the Noerr-Pennington
doctrine.1
II
We review de novo denials of motions to remand. See Carpenter
v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir.
1995). The district court rejected WCS’s motion to remand on the
basis that the artful pleading doctrine applied. The court reached
this conclusion notwithstanding the fact that the Sherman Act does
not completely preempt the Texas Antitrust Act. The district court
recognized that WCS’s claim under the Texas Antitrust Act was not
one subject to complete federal preemption. Indeed, the district
1
We have explained this doctrine as follows:
The Noerr-Pennington doctrine “allows individuals or
businesses to petition the government, free of the threat
of antitrust liability, for action that may have anti-
competitive consequences. Noerr-Pennington protection is
grounded on the theory that the right to petition
guaranteed by the First Amendment extends to petitions
for selfish, even anticompetitive ends.” Greenwood
Utilities Comm'n v. Mississippi Power Co., 751 F.2d 1484,
1497 (5th Cir. 1985). The doctrine was announced in
Eastern R.R. Presidents Conference v. Noerr Motor
Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464
(1961), where the Supreme Court held that the Sherman
Anti-Trust Act did not bar an association of railroad
companies from seeking legislation and regulations
destructive of the trucking industry. The Court has
expanded this holding to encompass the petitioning of
other public officials besides legislators. See United
Mine Workers of America v. Pennington, 381 U.S. 657, 85
S.Ct. 1585, 14 L.Ed.2d 626 (1965); Real Estate Investors
v. Columbia Pictures, 508 U.S. 49, 113 S.Ct. 1920, 123
L.Ed.2d 611 (1993).
Brown & Root, Inc. v. Louisiana State AFL-CIO, 10 F.3d 316, 325
(5th Cir. 1994).
4
court explicitly noted that federal antitrust law does not preempt
Texas’ antitrust law. See Pounds Photographic Labs, Inc. v.
Noritsu America Corp., 818 F.2d 1219, 1226 (5th Cir. 1987). The
district court held, however, that the Texas Antitrust Act was not
applicable on the facts. The district court interpreted the Texas
Act not to apply to actions that are wholly interstate in nature,
and it found that WCS could not establish a Texas antitrust action
because of the wholly interstate, or non-intrastate, nature of the
federal government’s waste disposal market. Although not expressly
saying so, the district court’s order clearly hinted that WCS’s
only possible claim was a federal one. Indeed, in a footnote, the
order states that it “does not address the merits of the
Plaintiff’s federal antitrust claim,” although WCS had not alleged
that cause of action. Based on this conclusion that a federal
claim effectively had been alleged, the court decided that it had
subject matter jurisdiction.
The district court’s decision regarding the viability of WCS’s
allegations appears to have been one the district court had no
jurisdiction to make. Without complete preemption, the artful
pleading doctrine does not apply. If this was once a matter of
debate, the Supreme Court recently has put the issue to rest. See
Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 118 S.Ct. 921,
925 (1998) (“The artful pleading doctrine allows removal where
federal law completely preempts a plaintiff’s state-law
claim. . . . Although federal preemption is ordinarily a defense,
5
once an area of state law has been completely considered, any claim
purportedly based on that pre-empted state law claim is considered,
from its inception, a federal claim, and therefore arises under
federal law.”)(citations and internal quotation marks omitted).
See also Caterpillar, Inc. v. Williams, 482 U.S. 386, 397 n.11
(1987) (“Although ‘occasionally the removal court will seek to
determine whether the real nature of the claim is federal,
regardless of plaintiff’s characterization, most [courts] correctly
confine this practice to areas of the law pre-empted by federal
substantive law.”) (quoting Federated Dep’t Stores, Inc. v. Moitie,
452 U.S. 394, 410 (1981) (Brennan, J., dissenting)). Indeed, even
prior to Rivet, this was the rule in this circuit and others. See
Avitts v. Amoco Prod. Co., 53 F.3d 690, 693 (5th Cir. 1995)
(“[W]hen both federal and state remedies are available, plaintiff’s
election to proceed exclusively under state law does not give rise
to federal jurisdiction. In the present case, there is no doubt
that Appellees have chosen to pursue only state law causes of
action. . . . The district court had no jurisdiction over the
subject matter . . . .”). See also James W. Moore, MOORE’S FEDERAL
PRACTICE § 107.14[3][b][iv], p. 107.86.2-86.3 & n.184.1 (3d ed.
1999) (citing cases from the Third, Eighth, and Ninth Circuits, but
noting some authority to the contrary).
The district court’s error, perhaps, lies in overreliance on
Carpenter, supra, 44 F.3d 362. The district court’s adoption of
language in Carpenter to support its holding that the artful
6
pleading doctrine could apply irrespective of the lack of complete
preemption does not take into account the full reach of the case’s
language or holding. For instance, the district court focused on
a statement in Carpenter that, “[t]he artful pleading doctrine
recognizes that the characterization of a federal claim as a state
claim will not in all cases prohibit removal when the plaintiff has
no state claim at all.” Id. at 367. That quote must be read in
context. First, Carpenter expressly stated:
In certain situations where the plaintiff necessarily has
available no legitimate or viable state cause of action,
but only a federal claim, he may not avoid removal by
artfully casting his federal suit as one arising
exclusively under state law. Although a defense,
preemption may so forcibly and completely displace state
law that the plaintiff’s cause of action is either wholly
federal or nothing at all.
Id. at 366 (emphasis added)(citing Avco Corp. v. Aero Lodge No.
735, Int’l Ass’n of Machinists, 390 U.S. 557, 559 (1968)). Indeed,
the district court did not note the next sentence and citation.
The doctrine does not convert legitimate state claims
into federal ones, but rather reveals the suit’s
necessary federal character. See Franchise Tax Board [v.
Construction Laborers Vacation Trust], 463 U.S. [1,] 23
[(1983)] (announcing that this exception to the well-
pleaded complaint rule “stands for the proposition that
if a federal cause of action completely preempts a state
cause of action any complaint that comes within the scope
of the federal cause of action necessarily ‘arises under’
federal law.”).
Carpenter specifically noted that the artful pleading doctrine is
a “narrow exception,” id. at 367, to the well-pleaded complaint
rule, and that “[t]he Supreme Court has required that the
preemption be complete.” Id. at n.2 (citations omitted). Finally,
7
Carpenter observed that “the Supreme Court has clearly sanctioned
the [artful pleading] rule only in the area of federal labor
relations and the Employee Retirement Income Security Act of
1974. . . .” Id.
In this circumstance, WCS remained the master of its
complaint. See Avitts, 53 F.3d at 693. Although WCS could have
alleged a federal cause of action in its state petition, it did
not. It filed a complaint in state court alleging wholly state
claims in a non-preempted field. Its choice is entitled to respect
and precluded removing the case to federal court absent
circumstances not presented here. For certain, we express no
opinion as to the viability of WCS’s state law claims. That is for
a Texas court to decide. The district court’s order, issued
without jurisdiction, can have no preclusive effect.
III
Despite improper removal and the district court’s error in
denying WCS’s motion to remand, we must nevertheless confront
whether WCS’s decision to amend its complaint in federal court to
state a claim under the Sherman Act waived this jurisdictional
defect.
Jurisdictional defects at time of removal notwithstanding, a
final judgment of a federal court may be binding even though the
case has been improperly removed, if jurisdiction exists at the
time judgment is entered. See Caterpillar, Inc. v. Lewis, 519 U.S.
61, 73 (1996) (“[E]rroneous removal need not cause the destruction
8
of a final judgment, if the requirements of federal subject-matter
jurisdiction are met at the time the judgment is entered.”); Grubbs
v. General Elec. Credit Corp., 405 U.S. 699, 702 (1972); Kidd v.
Southwest Airlines, Co., 891 F.2d 540, 547 (5th Cir. 1990).
To be binding despite improper removal, the plaintiff must
voluntarily amend its complaint, and there must be a final judgment
on the merits. See Kidd, 891 F.2d at 546. According to Kidd:
Where the disgruntled party takes full advantage of the
federal forum and then objects to removal only after
losing at the district court level, that party has waived
all objections to removal jurisdiction. Although Kidd
initially protested the district court’s removal
jurisdiction, we find that Kidd’s voluntary decision to
amend her complaint after the district court denied her
motion for remand waived this objection.
Id. (citations omitted). We must decide whether Kidd controls our
decision today.
Post-Kidd, the Supreme Court has looked favorably upon a
plaintiff’s argument that diligent objection renders the waiver
doctrine inapplicable. See Caterpillar, 519 U.S. at 72-77. The
Caterpillar Court expressly distinguished Grubbs, supra, 405 U.S.
at 702, on the basis that it addressed jurisdiction after removal
without objection. “The [Grubbs] decision is not dispositive of
the question whether a plaintiff, who timely objects to removal,
may later successfully challenge an adverse judgment on the ground
that the removal did not comply with statutory prescriptions.”
Caterpillar, 519 U.S. at 73. The Court noted that the plaintiff,
“by timely moving for remand, did all that was required to preserve
9
his objection to removal,” id. at 74, and held that a plaintiff in
this predicament need not seek permission for a 28 U.S.C. § 1292(b)
interlocutory appeal in order to preserve the error. Id. Despite
this favorable language, the Court ultimately upheld the federal
court judgment on the basis that “[o]nce a diversity case has been
tried in federal court . . . considerations of finality,
efficiency, and economy become overwhelming.” Id. at 75.2 Thus,
Caterpillar holds that timely objection can preserve the
jurisdictional claim despite subsequent amendment, even if other
considerations may ultimately outweigh that objection. See also
Hurt v. Dow Chem. Co., 963 F.2d 1142, 1145-46 (8th Cir. 1992)
(distinguishing Grubbs on the basis that plaintiff failed to object
to removal); Paxton v. Weaver, 553 F.2d 936, 941-42 (5th Cir.
1977). Because Grubbs holds that it is only the non-objecting
plaintiff who definitively waives its jurisdictional argument,
Grubbs is not applicable.
We also think that there has been no waiver here for at least
one other reason. Applying the Kidd elements, in deciding that
2
The Court further stressed that “[t]o wipe out the
adjudication post-judgment, and return to state court a case now
satisfying all federal jurisdictional requirements, would impose an
exorbitant cost on our dual court system, a cost incompatible with
the fair and unprotracted administration of justice.” Id. at 77.
Here, that concern arguably is not implicated. A diversity case
differs fundamentally from a federal question case. With a
diversity case, a federal court applies state law exactly as would
a state court. See, e.g., Erie R. Co. v. Tompkins, 304 U.S. 64
(1938). There is no difference in the treatment of the substance
of plaintiff’s claims; the change is largely procedural if at all.
10
waiver is not applicable to WCS, we are greatly influenced because
there was no trial on the merits.3 Though the reach of the
3
WCS also objects that its amendment was not voluntary, citing
Humphrey v. Sequentia, Inc., 58 F.3d 1238 (8th Cir. 1995), a case
in which the district court had found the plaintiff’s state law
claim to be preempted. “Thus, the district court presented [the
plaintiff] with a Hobson’s choice. Under the circumstances, his
options were to amend his complaint to allege the federal LMRA
claims or risk dismissal of the complaint and, consequently,
preclusion of his federal claims under the doctrine of res
judicata.” Id. at 1241. We note that a similar Hobson’s choice
argument has not been uniformly accepted. In Bernstein v. Lind-
Waldock Co., 738 F.2d 179, 185 (7th Cir. 1984), Judge Posner
persuasively wrote:
[A]fter Bernstein’s motion to remand was denied, he threw
in the towel, as it were, and filed an amended complaint
in federal court that included an unmistakable federal
cause of action against the Exchange. The amended
complaint was thus within the original jurisdiction of
the federal district courts and it makes no difference
that it was filed only because Bernstein’s previous suit
had improperly been removed. If he was convinced that
the original action was not removable he could have stuck
by his guns and we would have vindicated his position on
appeal. But once he decided to take advantage of his
involuntary presence in federal court to add a federal
claim to his complaint he was bound to remain there.
Otherwise he would be in a position where if he won his
case on the merits in federal court he could claim to
have raised the federal question in his amended complaint
voluntarily, and if lost he could claim to have raised it
involuntarily and to be entitled to start over in state
court. He ‘cannot be permitted to invoke the jurisdiction
of the federal court, and then disclaim it when he
loses.’
(Citing Brough v. United Steelworkers of America, 437 F.2d 748, 750
(1st Cir. 1971)). In Sigmon, supra, 110 F.3d at 1202-03, we cited
this language favorably but without discussion. Bernstein, though
not Sigmon, precedes Caterpillar’s apparent approval of the
plaintiff’s effort to do “all that was required to preserve his
objection to removal.” 519 U.S. at 74. As we have noted,
Caterpillar preserves for appeal objection to jurisdiction if
timely objected to in the first place, and in the absence of other
equitable issues. More important, despite its obvious attraction,
11
expression “trial on the merits” is unclear in this context, we
hold that it stops short of a Rule 12(b)(6) dismissal. Although we
have defined this phrase to include summary judgments, see Kidd,
891 F.2d at 546; Sigmon v. Southwest Airlines Co., 110 F.3d 1200,
1202 n.6 (5th Cir. 1996), we have not gone further than that. On
the same question, sister circuits have expressly held that a
“trial on the merits” does not include 12(b)(6) dismissals. See,
e.g., Chivas Products, Ltd. v. Owen, 864 F.2d 1280, 1286-87 (6th
Cir. 1988)(citing cases from the Fourth, Fifth, Ninth, and Eleventh
Circuits), rev’d on other grounds, Tafflin v. Levitt, 493 U.S. 455
(1990). In Kidd, we stated that “the ‘trial on the merits’
requirement comprehends a full bench or jury trial, as well as a
summary judgment dismissal.” 891 F.2d at 546 (citation omitted).
This statement is in accord with the usual rule. See, e.g.,
Bennett v. Pippin, 74 F.3d 578, 585 (5th Cir. 1996)(differentiating
summary judgments with Rule 12(b)(6) motions); Wright & Miller, 5A
Federal Practice & Procedure: Civil 2d § 1356 (West 1990) (“The
purpose of a motion under Rule 12(b)(6) is to test the formal
sufficiency of the statement of the claim; it is not a procedure
for resolving a contest about the facts or the merits of the
case.”). To be sure, the usual course of action upon granting a
defendant’s Rule 12(b)(6) motion is to allow a plaintiff to amend
Judge Posner’s language must admit some exception. If it were the
firm and fast rule, an amendment of one’s complaint after improper
removal would always constitute waiver of the jurisdictional
argument despite the prerequisite for a judgment on the merits.
12
his or her complaint, see Foman v. Davis, 371 U.S. 178, 182 (1962),
which implies that a plaintiff often may still be able to state a
claim if pleaded properly. Without any factual review as applied
to the plaintiff’s allegations, the “merits” of a plaintiff’s case
have not been sufficiently addressed for purposes of this issue.
One final consideration that influences our decision (which
may be said to stem from the fact that there was no judgment on the
merits), is the absence here of the “[overwhelming] considerations
of finality, efficiency, and economy,” which was compelling for
the Court in Caterpillar. 519 U.S. at 75. This case consumed,
relatively, a minimum of judicial resources. No hearing was ever
held in this matter. In comparison to the three and one-half years
of litigation and six-day jury trial in Caterpillar,4 the district
court, in perhaps the overstated words of WCS, granted it, “only
eleven days and ten pages to reply to Envirocare’s Motion to
Dismiss,” before it ruled. The few months during which this case
improperly resided in federal district court are not comparably
overwhelming.
In sum, the doctrine of waiver after improper removal is not
applicable on these facts. As WCS timely objected to removal, it
4
Caterpillar’s finding of finality, efficiency, and economy
considerations was made by analogy to Newman-Green, Inc. v.
Alfonzo-Larrain, 490 U.S. 826 (1989), a diversity case in which the
Court stated that “requiring dismissal after years of litigation
would impose unnecessary and wasteful burdens on the parties,
judges, and other litigants waiting for judicial attention.” Id.
at 836. An apparently expedited Rule 12(b)(6) decision hardly is of
the same magnitude to either case.
13
has not waived its objection to that removal despite its subsequent
amendment of its claim.5
IV
“An order remanding [an improperly removed] case may require
payment of just costs and any actual expenses, including attorney
fees, incurred as the result of the removal.” 28 U.S.C. § 1447(c).
Appellant’s costs and expenses before this court and the district
court were certainly “incurred as the result of the removal.” See
Avitts v. Amoco Prod. Co., 111 F.3d 30, 32 (5th Cir. 1997).
“[O]rdinary litigation expenses that would have been incurred had
the action remained in state court are not recoverable. . . .” Id.
at 32. Moreover, an award of attorney’s fees under § 1447(c) for
the plaintiff who plays an “active role . . . in persuading the
district court to retain jurisdiction” is inappropriate. Id. at
33. In this case, however, WCS may be said to have taken an
opposite position with respect to jurisdiction, despite its
amendment. Furthermore, we are persuaded that WCS’s attorney’s
fees in the district court would not have been incurred had the
5
We also find merit in WCS’s position of the narrowness of its
amendment. The company filed an amended complaint to state the one
and only claim the district court suggested it had, and a claim
that was consistent with its state court pleading. In comparison,
in Kidd, the plaintiff brought a breach of her employment contract
claim in state court. Upon removal to federal court and denial of
her motion to remand, plaintiff “amended her complaint to assert
breaches of Southwest’s employee stock ownership plan and employee
profit-sharing plan” under ERISA. 891 F.2d at 542. Thus, the
plaintiff added an entirely new cause of action. Such an action
speaks to a studied decision to take advantage of the forum once
there.
14
action remained in state court. After all, the litigation expense
incurred in federal court involved efforts to remand the case to
state court and, failing that, WCS amendment of its pleadings to
state a federal cause of action and subsequent defense of that
position against Envirocare’s motion to dismiss. It appears to us
that WCS would not have incurred these fees if Envirocare had not
improperly removed the case. We therefore conclude that WCS is
entitled under the statute to the full costs and expenses,
including attorney’s fees, incurred in defending against the
improper removal and all other action in district court.
V
In sum, we hold that this action was improperly removed to
district court and that WCS’s motion to remand should have been
granted. Furthermore, on the facts of this case, WCS did not waive
its jurisdictional argument by amending its complaint in the
district court to state a federal cause of action under the Sherman
Act. WCS’s antitrust cause of action may or may not be able to
escape dismissal in state court, but that is not for a federal
court to decide.
This district court lacked subject matter jurisdiction over
this action. Its orders are therefore VACATED, and the case is
REMANDED to the district court with instructions to remand this
action to the state court from which it was removed in accordance
with 28 U.S.C. § 1447(c) and to award costs and fees to WCS upon
submission of proper proof.
15
VACATED and REMANDED.
16